Califano v. Yamasaki

Citation442 U.S. 682,99 S.Ct. 2545,61 L.Ed.2d 176
Decision Date20 June 1979
Docket NumberNo. 77-1511,77-1511
PartiesCALIFANO, Secretary of Health, Education and Welfare v. YAMASAKI et al
CourtUnited States Supreme Court

Section 204(a)(1) of the Social Security Act (Act) authorizes the Secretary of the Department of Health, Education, and Welfare to recoup erroneous overpayments made to a beneficiary under the old-age, survivors', or disability insurance programs by decreasing future payments to which the overpaid person is entitled. However, § 204 (b) commands that "there shall be no adjustment of payments to, or recovery by the United States from, any person who is without fault if such adjustment would defeat the purpose of this subchapter or would be against equity and good conscience." Under the Secretary's practice, after an ex parte determination is made under § 204 (a) that an overpayment has been made, and after the recipient is notified of that determination, the recipient may file a written request seeking reconsideration of the determination or asking the Secretary to waive recovery in accordance with § 204 (b). If, upon review of the papers, the decision goes against the recipient, recoupment begins and the recipient is given an opportunity for an oral hearing only if he thereafter continues to object to recoupment. The recipient may seek subsequent administrative review, and finally may seek review by a federal court under § 205 (g) of the Act, which provides that any person, after any final decision of the Secretary made after a hearing to which he was a party, may obtain review of the decision by instituting a civil action. Respondents, who had unsuccessfully sought administrative relief from recoupment determinations, instituted federal actions, alleging that because they had not been given adequate notice and an opportunity for an oral hearing before recoupment began, the recoupment procedures violated both § 204 and the Due Process Clause of the Fifth Amendment. In each action, class certification was sought, and in one action it was requested that the class be nationwide. The respective District Courts granted class certification, held that the Secretary's recoupment procedures were unconstitutional, and ordered injunctive relief. The Court of Appeals consolidated the cases on appeal and upheld the certification of the classes. On the merits, the court, without directly addressing respondents' statutory claims, held, inter alia, that when waiver of recoup- ment was requested pursuant to § 204(b), the Due Process Clause required that the recipient be given an oral hearing before recoupment began, but that a prior hearing was not required in § 204(a) reconsideration cases if the dispute centered on a computational error or a payment problem not demanding an evaluation of credibility.

Held:

1. Recipients who file a written request for waiver under § 204(b) are entitled to the opportunity for a prerecoupment oral hearing, but those who merely request reconsideration under § 204(a) are not so entitled. Pp. 692-697.

(a) On its face, § 204 requires that the Secretary make a prerecoupment waiver decision, and that the decision, like that concerning the fact of the overpayment, be accurate. Pp. 693-695.

(b) Neither § 204 nor the standards of the Due Process Clause require prerecoupment oral hearings as to requests under § 204(a) for reconsideration as to whether overpayment occurred. The rare instance in which a credibility dispute is relevant to a § 204(a) claim is not sufficient to require the Secretary to grant a hearing to the few requests that involve credibility. However, with respect to § 204(b) waiver of the Secretary's right to recoup, the nature of the statutory standards involving determinations of "fault" and whether recoupment would be "against equity and good conscience" makes a prerecoupment oral hearing essential when a recipient requests waiver. Pp. 695-697.

2. Nothing in § 205(g) prohibits the prerecoupment hearing relief awarded in this case. Pp. 697-706.

(a) Where a district court has jurisdiction over the claims of the members of the class in accordance with the requirements set out in § 205(g), it also has discretion under Fed.Rule Civ.Proc. 23 to certify a class action for the litigation of those claims. Pp. 698-701.

(b) There was no abuse of discretion in certifying a nationwide class. Pp.701-703

(c) While the classes certified here exceed the bounds permitted by § 205(g)'s "final decision" requirement because they include persons who have not filed requests for reconsideration or waiver in the past and will not do so in the future, nevertheless there is no basis for altering the relief actually granted, as it did not include those who do not meet such requirement. Pp. 703-704.

(d) Injunctive relief may be awarded in a § 205(g) proceeding, nothing in either the language or the legislative history of the statute indicating that Congress intended to preclude injunctive relief. Pp. 704-706.

564 F.2d 1219, affirmed in part and reversed in part.

Peter Buscemi, Washington, D. C., for petitioner, pro hac vice, by special leave of Court.

Stanley E. Levin, Honolulu, Hawaii, for respondents.

Mr. Justice BLACKMUN delivered the opinion of the Court.

Petitioner, the Secretary of the Department of Health, Education, and Welfare (HEW), has determined that respondents, beneficiaries under the Social Security Act, have been overpaid. He seeks to recoup those overpayments by withholding future benefits to which respondents would otherwise be entitled. Respondents in turn have requested reconsideration or waiver of recoupment under § 204 of the Act, 42 U.S.C. § 404. The primary questions in this case are whether petitioner must grant respondents the opportunity for an oral hearing before recoupment begins, and whether jurisdiction under § 205(g) of the Act, 42 U.S.C. § 405(g), permits a federal district court to certify a nationwide class and grant injunctive relief.

I

Section 204(a)(1) of the Social Security Act, 53 Stat. 1368, as amended, 42 U.S.C. § 404(a)(1), authorizes the recovery of overpayments made to a beneficiary under the old-age, survivors', or disability insurance programs administered by HEW. In particular, it permits the Secretary to recoup erroneous overpayments by decreasing future payments to which the overpaid person is entitled.

Section 204(b), however, expressly limits the recoupment authority conferred by § 204(a)(1). Section 204(b), as set forth in 42 U.S.C. § 404(b), commands that

"there shall be no adjustment of payments to, or recovery by the United States from, any person who is without fault if such adjustment or recovery would defeat the purpose of this subchapter or would be against equity and good conscience." 1

The Secretary has undertaken to define the terms employed in § 204(b). Under his regulations, "without fault" means that the recipient neither knew nor should have known that the overpayment or the information on which it was based was incorrect. 20 CFR § 404.507 (1978). For example, a recipient who justifiably relied upon erroneous information from an official source within the Social Security Administration would be "without fault." § 404.510.

The regulations say that to "defeat the purpose of the subchapter" is to "deprive a person of income required for ordinary and necessary living expenses." § 404.508(a). Those expenses are defined to include, among other things, food, rent, and medical bills. §§ 404.508(a)(1) and (2). Recoupment is "against equity and good conscience" when the recipient "because of a notice that such payment would be made or by reason of the incorrect payment, relinquished a valuable right . . . or changed his position for the worse." § 404.509. An example of detrimental reliance that would be sufficient is permitting private hospital insurance to lapse in the mistaken expectation of receiving federal hospital benefits. Ibid.

The Secretary's practice is to make an ex parte determination under § 204(a) that an overpayment has been made, to notify the recipient of that determination, and then to shift to the recipient the burden of either (i) seeking reconsideration to contest the accuracy of that determination, or (ii) asking the Secretary to forgive the debt and waive recovery in accordance with § 204(b).2 If a recipient files a written request for reconsideration or waiver, recoupment is deferred pending action on that request. Social Security Claims Manual §§ 5503.2(c), 5503.4(b) (Dec. 1978) (Claims Manual). The papers are sent to one of the seven regional offices where the request is reviewed.

If the regional office decision goes against the recipient, recoupment begins. The recipient's monthly benefits are reduced or terminated 3 until the overpayment has been re- couped. Only if the recipient continues to object is he given an opportunity to present his story in person to someone with authority to decide his case. That opportunity takes the form of an on-the-record de novo evidential hearing before an independent hearing examiner. 20 CFR §§ 404.917, 404.931 (1978). The recipient may seek subsequent review by the Appeals Council, § 404.945, and finally by a federal court. § 205(g) of the Act, 42 U.S.C. § 405(g). If it is decided that the Secretary's initial determination was in error, the amounts wrongfully recouped are repaid.

II The Elliott Case 4

The Secretary overpaid the Hawaii respondents,5 and notified them of his determination to recoup the overpayments. After unsuccessful attempts to obtain administrative relief, they brought suit in the United States District Court for the District of Hawaii challenging the legality of the Secretary's recoupment procedures. They alleged that, because the notice they received was inadequate and because they were not given an opportunity for an oral hearing before recoupment began, the recoupment procedures violated both § 204 of the Act and the Fifth Amendment of the Constitution. They sought class...

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